Those holding Jianzhi Education Technology Group Company Limited (NASDAQ:JZ) shares would be relieved that the share price has rebounded 27% in the last thirty days, but it needs to keep going to repair the recent damage it has caused to investor portfolios. But the last month did very little to improve the 55% share price decline over the last year.
In spite of the firm bounce in price, given about half the companies operating in the United States’ Consumer Services industry have price-to-sales ratios (or “P/S”) above 1.2x, you may still consider Jianzhi Education Technology Group as an attractive investment with its 0.6x P/S ratio. Nonetheless, we’d need to dig a little deeper to determine if there is a rational basis for the reduced P/S.
What Does Jianzhi Education Technology Group’s Recent Performance Look Like?
Jianzhi Education Technology Group has been doing a decent job lately as it’s been growing revenue at a reasonable pace. Perhaps the market believes the recent revenue performance might fall short of industry figures in the near future, leading to a reduced P/S. If you like the company, you’d be hoping this isn’t the case so that you could potentially pick up some stock while it’s out of favour.
Although there are no analyst estimates available for Jianzhi Education Technology Group, take a look at this free data-rich visualisation to see how the company stacks up on earnings, revenue and cash flow.
Do Revenue Forecasts Match The Low P/S Ratio?
There’s an inherent assumption that a company should underperform the industry for P/S ratios like Jianzhi Education Technology Group’s to be considered reasonable.
If we review the last year of revenue growth, the company posted a worthy increase of 6.9%. Pleasingly, revenue has also lifted 41% in aggregate from three years ago, partly thanks to the last 12 months of growth. So we can start by confirming that the company has done a great job of growing revenues over that time.
Comparing that to the industry, which is predicted to deliver 13% growth in the next 12 months, the company’s momentum is pretty similar based on recent medium-term annualised revenue results.
With this information, we find it odd that Jianzhi Education Technology Group is trading at a P/S lower than the industry. Apparently some shareholders are more bearish than recent times would indicate and have been accepting lower selling prices.
What Does Jianzhi Education Technology Group’s P/S Mean For Investors?
The latest share price surge wasn’t enough to lift Jianzhi Education Technology Group’s P/S close to the industry median. While the price-to-sales ratio shouldn’t be the defining factor in whether you buy a stock or not, it’s quite a capable barometer of revenue expectations.
The fact that Jianzhi Education Technology Group currently trades at a low P/S relative to the industry is unexpected considering its recent three-year growth is in line with the wider industry forecast. When we see industry-like revenue growth but a lower than expected P/S, we assume potential risks are what might be placing downward pressure on the share price. It appears some are indeed anticipating revenue instability, because the persistence of these recent medium-term conditions should normally provide more support to the share price.
Don’t forget that there may be other risks. For instance, we’ve identified 2 warning signs for Jianzhi Education Technology Group that you should be aware of.
It’s important to make sure you look for a great company, not just the first idea you come across. So if growing profitability aligns with your idea of a great company, take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.